Heavy Put Option Activity Signals Bearish Sentiment in Avenue Supermarts Ltd

Put Option Activity Highlights

Data from the derivatives market reveals that Avenue Supermarts is among the most actively traded stocks in the put options segment. The underlying stock, currently valued at ₹3,897, has seen significant put contracts traded across several strike prices clustered near the current market level. The most active strikes include ₹3,800, ₹3,900, ₹3,850, ₹3,700, and ₹3,600, all expiring on 27 January 2026.

The ₹3,800 strike stands out with 5,259 contracts traded, generating a turnover of ₹358.3 lakhs and an open interest of 2,326 contracts. This is closely followed by the ₹3,900 strike, which recorded 3,009 contracts traded with a turnover of ₹380.2 lakhs and open interest of 804 contracts. The ₹3,850 strike also saw substantial activity with 2,453 contracts traded and a turnover of ₹227.1 lakhs.

Other notable strikes include ₹3,700 with 2,519 contracts traded and ₹3,600 with 2,244 contracts, indicating a broad range of put option interest spanning from slightly out-of-the-money to moderately in-the-money levels. The cumulative turnover across these strikes exceeds ₹1,090 lakhs, underscoring the sizeable capital flow into put options on Avenue Supermarts.

Market Context and Stock Performance

Despite the surge in put option activity, Avenue Supermarts has been performing relatively well in the cash market. The stock has gained 2.7% over the last two trading sessions, touching an intraday high of ₹3,918.6 on 12 January 2026, representing a 3.09% rise from the previous close. This outperformance is in line with the broader retail sector, which has advanced by 2.36% on the day, while the Sensex declined by 0.47%.

Technical indicators show the stock trading above its 5-day and 20-day moving averages, signalling short-term strength. However, it remains below its 50-day, 100-day, and 200-day moving averages, suggesting that medium- to long-term momentum is still under pressure. Delivery volumes have also increased, with 3.87 lakh shares delivered on 9 January, a 26.2% rise compared to the five-day average, indicating rising investor participation.

Liquidity remains robust, with the stock’s average traded value supporting trade sizes of up to ₹5.9 crore comfortably, making it a liquid large-cap stock for institutional and retail investors alike.

Bearish Positioning and Hedging Implications

The concentration of put option volumes near the current market price suggests that traders are positioning for potential downside or are hedging existing long exposures. The open interest figures, particularly at the ₹3,800 strike with 2,326 contracts, indicate that a significant number of investors are either buying protection or speculating on a decline below this level before expiry.

Interestingly, the highest turnover is recorded at the ₹3,900 and ₹3,800 strikes, which are close to the spot price, implying that market participants expect volatility around these levels. The presence of substantial open interest at the ₹3,700 and ₹3,600 strikes further points to a cautious sentiment, with some investors bracing for a deeper correction.

Given Avenue Supermarts’ current Mojo Score of 38.0 and a Mojo Grade of Sell—downgraded from Hold on 31 October 2025—these option market signals align with the fundamental assessment. The company’s market cap stands at a hefty ₹2,47,610 crore, categorising it as a large-cap stock, but the low Market Cap Grade of 1 reflects concerns over valuation or near-term prospects.

Sector and Peer Comparison

The diversified retail sector, to which Avenue Supermarts belongs, has shown resilience with a 2.36% gain on the day. However, the stock’s relative underperformance against its own moving averages and the bearish option positioning may indicate that investors are selectively cautious about DMART’s near-term outlook compared to peers.

Such put option activity often precedes periods of increased volatility or correction, especially when clustered around key strike prices near the current market value. Investors should monitor the evolving open interest and volume patterns as the 27 January expiry approaches to gauge whether the bearish sentiment intensifies or dissipates.

Investor Takeaway

While Avenue Supermarts has demonstrated short-term strength with recent gains and increased delivery volumes, the pronounced put option activity signals a degree of caution among traders. The heavy put volumes at strikes ranging from ₹3,600 to ₹3,900 suggest that market participants are either hedging against downside risk or speculating on a correction in the near term.

Investors should weigh these signals alongside the company’s fundamental outlook, which currently carries a Sell grade from MarketsMOJO, reflecting concerns over valuation and growth prospects. The stock’s technical positioning below key longer-term moving averages further supports a cautious stance.

Given the stock’s liquidity and large market capitalisation, Avenue Supermarts remains an important bellwether for the diversified retail sector. However, the option market activity ahead of the January expiry warrants close monitoring for signs of shifting sentiment or volatility spikes.

In summary, while the stock’s recent price action has been positive, the surge in put option interest highlights a hedging trend and a potential bearish tilt that investors should factor into their risk management strategies.

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